Correlation Between Taiwan Weighted and First Financial
Can any of the company-specific risk be diversified away by investing in both Taiwan Weighted and First Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Taiwan Weighted and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Taiwan Weighted and First Financial Holding, you can compare the effects of market volatilities on Taiwan Weighted and First Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Taiwan Weighted with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taiwan Weighted and First Financial.
Diversification Opportunities for Taiwan Weighted and First Financial
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Taiwan and First is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Taiwan Weighted and First Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Holding and Taiwan Weighted is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Taiwan Weighted are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Holding has no effect on the direction of Taiwan Weighted i.e., Taiwan Weighted and First Financial go up and down completely randomly.
Pair Corralation between Taiwan Weighted and First Financial
Assuming the 90 days trading horizon Taiwan Weighted is expected to under-perform the First Financial. But the index apears to be less risky and, when comparing its historical volatility, Taiwan Weighted is 1.24 times less risky than First Financial. The index trades about -0.12 of its potential returns per unit of risk. The First Financial Holding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,715 in First Financial Holding on August 31, 2024 and sell it today you would earn a total of 5.00 from holding First Financial Holding or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Taiwan Weighted vs. First Financial Holding
Performance |
| Timeline |
Taiwan Weighted and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Taiwan Weighted
Pair trading matchups for Taiwan Weighted
First Financial Holding
Pair trading matchups for First Financial
Pair Trading with Taiwan Weighted and First Financial
The main advantage of trading using opposite Taiwan Weighted and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taiwan Weighted position performs unexpectedly, First Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Financial will offset losses from the drop in First Financial's long position.| Taiwan Weighted vs. Level Biotechnology | Taiwan Weighted vs. Hsin Kuang Steel | Taiwan Weighted vs. China Steel Corp | Taiwan Weighted vs. Sunmax Biotechnology Co |
| First Financial vs. Mega Financial Holding | First Financial vs. CTBC Financial Holding | First Financial vs. Hua Nan Financial | First Financial vs. ESUN Financial Holding |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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